Moorhead ordinance stops payday lenders from charging steep interest rates
The ordinance will go into effect on Friday
MOORHEAD, Minn. – Moorhead is hoping to pave the way for frustrated Minnesota cities with a new ordinance to limit payday lenders.
They’re calling it the Moorhead Model. It’s the first of its kind in Minnesota. It will stop payday lenders from charging big annual fees.
“Unfortunately when your business model relies on charging three hundred, four hundred, or five hundred dollars in interest rates on financially vulnerable individuals, it’s a dangerous business model,” Moorhead City Council Member Heidi Durand said.
Last year, Moorhead payday lenders averaged their annual fees at 200 percent. However, some fees went all the way up to 476 percent. With the ordinance, the city will cap the annual fees lenders are able to charge at 33 percent.
“With the economic uncertainty, with unemployment benefits drying up, we felt it was very crucial to pass protective measures to keep our financially vulnerable friends and neighbors and relatives safe,” Durand said.
“It’s about that holding of accountability so that we make sure we aren’t taking advantage of citizens that might be economically disadvantaged,” Moorhead Mayor Johnathan Judd said.
Lenders will also no longer be able to require payment on the borrower’s next payday. Instead, they must offer a minimum of 60 days for repayment.
“The time is right especially now. When time and financial resources are really slim for a lot of families. We should take that time to educate how money works,” Judd said.
“It’s been too long. It hasn’t been soon enough. I had a lot of support from city staff, fellow council members, the human rights commission. They all agreed that this is something that has not been official to our residents, and it’s very harmful,” Durand said.
Moorhead has two payday lenders: Peoples Small Loan and Greenbacks. Greenbacks says it will be closing its doors on Friday.